Hyundai executives balked at the prospective cost of expanded warranty coverage in 1997. Case says the make's quality was good enough in the late 1990s to safely allow the company to back its vehicles with a longer warranty.
But the cost of Case's doubled warranty remains a question. Case would not disclose his upfront cost or divulge claims figures for the 10-year/100,000-mile coverage he extended on Honda, Acura, Mazda and Audi.
His warranty programs are insured through Protective Life Insurance's Asset Protection Division in St. Louis. The limited warranty includes a $200 deductible per occurrence.
Some insurers point out that after 20 years or 200,000 miles, the incidence of transmission and engine repairs rises substantially.
"At over 100,000 miles, you are going to have a high number of expensive claims," says Al Ranieri, president of American Auto Guardian Inc., of suburban Chicago, an independent provider of extended vehicle service contracts. But lifetime engine coverage is popular in certain markets, and that's similar, Ranieri says. The vehicles also are already covered for the first 100,000 miles, he says.
"It's an appealing concept that might get floor traffic," Ranieri says.
Case reduces his financial exposure by making the warranty nontransferable to second owners and requiring original owners to follow and document the factory's recommended maintenance schedule. Many customers will trade their vehicles before driving 200,000 miles, and over time some may forget about the coverage.
"My wife bought a Toyota, and two years later, when we looked inside the glove compartment, we found she had a lifetime tire warranty," says Gary Fagg, a Dallas area insurance consultant. "The first thing the warranty says is that the tires need to be rotated every 5,000 miles. We had 8,000 miles on the car before we realized there was a warranty. We already voided it."
Based on his studies of limited lifetime warranties, Fagg estimates Case pays $100 to $200 per new vehicle sold to provide the longer warranty coverage. "There will be some claims, I assure you," Fagg says. "There are people who keep their cars and they tend to do their scheduled maintenance."
Fagg says people probably wouldn't buy a 20-year/200,000-mile warranty. But if it comes with the new vehicle, as it does at the Case stores, it can "help differentiate the dealership from the competing store across town."